2024 (4) TMI 1207 - AT - Income Tax

Validity of approval granted u/s 153D - procedural requirements for granting approval - HELD THAT - AO vide letters dated 21.03.2013 sent draft assessment orders in respect of six different assessees for various assessment years for approval of the Additional Commissioner in terms of section 153D. Perusal of copies of the aforesaid letters placed in the paper book reveals that the AO has simply sent the draft assessment orders without the assessment records and seized material. Interestingly enough on the very same day i.e. 21.03.2013 the Additional Commissioner has granted approval u/s 153D of the Act in respect of six different assessees involving multiple assessment years. A careful reading of the approval granted u/s 153D of the Act clearly indicates that the Approving Authority has neither examined the assessment records nor the seized materials. In fact the letter of the AO seeking approval also makes it clear that only draft assessment orders were sent for approval without assessment records or seized materials. It is further clear that on the very same day the letter of the AO with draft assessment orders were received approval u/s 153D was granted by the Approving Authority. The aforesaid facts clearly reveal that the Approving Authority while granting approval u/s 153D of the Act has acted as a mere rubber stamp. The approval granted is completely mechanical without application of mind. Thus in our view the approval granted u/s 153D is not in accordance with the provisions contained u/s 153D of the Act keeping in view the ratio laid down in various judicial precedents discussed herein above. Thus in our view the approval granted u/s 153D of the Act is invalid. Assessee appeal allowed.

Summary

Issues Involved:

1. Validity of assessment orders due to alleged invalid approval under Section 153D of the Income-tax Act, 1961.
2. Compliance with procedural requirements for granting approval under Section 153D.
3. Impact of mechanical approval on the validity of assessment orders.

Detailed Analysis:

1. Validity of Assessment Orders due to Alleged Invalid Approval under Section 153D of the Income-tax Act, 1961:

The primary issue in the appeals was the validity of the assessment orders based on the alleged invalid approval granted under Section 153D of the Income-tax Act, 1961. The assessee challenged the assessment orders on the grounds that the approval granted by the Additional Commissioner of Income-tax was mechanical and lacked proper application of mind. The Tribunal noted that Section 153D mandates prior approval from a competent authority before passing any assessment or reassessment order in search-related cases. The Tribunal emphasized that the approval process should involve a thorough examination of the assessment records and seized materials, which was not evident in this case.

2. Compliance with Procedural Requirements for Granting Approval under Section 153D:

The Tribunal scrutinized the procedural compliance regarding the approval process under Section 153D. It observed that the Additional Commissioner granted approval for multiple assessment orders on the same day without referring to any seized material or assessment records, indicating a lack of due diligence. The Tribunal referred to judicial precedents, including decisions from the Hon'ble Delhi High Court and the Hon'ble Supreme Court, which underscored the necessity for the approving authority to apply its mind judiciously and not act as a mere rubber stamp. The Tribunal concluded that the approval granted was not in accordance with the provisions of Section 153D, rendering it invalid.

3. Impact of Mechanical Approval on the Validity of Assessment Orders:

The Tribunal analyzed the consequences of mechanical approval on the validity of the assessment orders. It highlighted that the approval granted under Section 153D serves as an in-built protection against arbitrary or unjust exercise of power by the Assessing Officer. The Tribunal found that the approval in question was granted without proper examination of the relevant materials, thus failing to meet the statutory requirements. Consequently, the Tribunal held that the assessment orders passed based on such invalid approval were also invalid and deserved to be quashed.

Conclusion:

The Tribunal concluded that the approval granted under Section 153D was mechanical and lacked the necessary application of mind, rendering it invalid. As a result, the assessment orders passed in pursuance of such approval were also invalid and were quashed. The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals as infructuous, given the quashing of the assessment orders. The decision emphasized the importance of adherence to procedural safeguards and the necessity for a judicious approach in granting approvals under Section 153D to uphold the validity of assessment orders.